Bill aims to earn Texas nursing homes more federal Medicaid funding

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Nursing homes in Texas on average have to cover a gap of roughly $20 per day taking care of residents who pay with Medicaid, but a bill before the state legislature seeks to close that gap with the help of federal funding.

Senate Bill 1130, filed by Sen. Juan Hinojosa, D-McAllen, was discussed before the Senate Committee on Health and Human services March 27. Proponents say the bill would bring in about $440 million in federal funding per biennium to be distributed across the state’s 1,200 nursing homes at no cost to the state. This money could help nursing homes afford much-needed capital projects and combat high staff turnover rates, Hinojosa said.

However, the bill was ultimately left pending due to concerns from private pay nursing homes—which do not accept payments through Medicaid—that they would end up paying into the system without receiving a benefit.

Estimates from the Texas Health Care Association—a nursing home trade association representing about 500 nursing homes—show providers in Texas spend an average of $160 per day caring for Medicaid residents. About $140 of that is reimbursed today, resulting in the $20 gap. SB 1130 could close that gap to around $1, which would help nursing homes better deal with high staff turnover rates, fund capital improvement projects and provide more consistent quality care for residents, Hinojosa said at the March 27 committee meeting.

“The reimbursement rates for Medicaid are low and don’t cover the cost,” he said. “Staff turnover is so high that it puts at risk the quality of care. We are trying to set up this concept statewide to alleviate some of the financial pressure some of our nursing homes [are facing]so they are able to improve facilities and provide better pay.”

How it works

SB 1130 proposes taking advantage of a federal program by creating a Nursing Facilities Reinvestment Allowance paid by nursing homes based on their revenues. Through a self-assessed fee, nursing homes across the state would each contribute about 6 percent of revenue—an estimated $375 million in total—to a state trust fund. The state would use the funds to draw down matching dollars from the federal government through the Centers for Medicare & Medicaid Services.

The $375 million in self-assessed fees would then be distributed back to the nursing homes dollar-per-dollar, Hinojosa said. THCA, which worked with Hinojosa on crafting the bill, estimates a total of $440 million in new dollars from the federal government would be leftover and available to distribute to nursing homes. Those funds would be split, with half going toward improving Medicaid rates and half going toward improving resident care based on a CMS five-star rating program.

Texas is one of six states in the U.S. that does not take advantage of this program, said Eddie Parades, vice president of government affairs with StoneGate Senior Living and a member of the THCA who helped craft SB 1130.

About 85 percent of the 120,000 nursing home residents in Texas are on Medicaid, Parades said. Without the influx of federal funds or a rate increase from the state, long-term care providers that rely on Medicaid reimbursements will quickly be in a crisis, he said.

“We are on razor thin margins,” Parades said. “If we don’t get a rate increase this year, there will no doubt be nursing home closings in Texas. Nursing homes will start closing in rural markets first. Those families won’t have long-term care placement and access, so they’ll have to drive to cities, which would cause a back-up in hospitals.”

Opponents question viability

Similar bills have been filed in past legislative sessions, but have fallen short because of fears that such a system would disadvantage nursing homes that have few or no Medicaid patients. In past bills, these low-Mediciad facilities—which serve mainly patients who pay through Medicare of private funds—were asked to pay the self-assessed fee, but because funding is redistributed based on the number of Medicaid patients each facility serves, they feared they would not be given their money back and would have to pass the expense of the fee on to their residents.

Officials behind SB 1130 said these low-Medicaid facilities would be made whole under the system proposed in SB 1130, meaning they would not shoulder any financial burden. Part of the process involves creating a nonprofit corporation that allows high-Medicaid homes to offset the cost of the program for low-Medicaid homes through voluntary payments. About 90 percent of the Medicaid nursing homes, when asked about the program, said they would be willing to participate, Hinojosa said. With the influx of federal dollars, they would still benefit, he said.

However, the CMS program that SB 1130 takes advantage of does not allow any mechanisms that would guarantee private pay nursing homes their money back, so the establishment of the nonprofit and any details on how it is run cannot be included in the language of SB 1130. Opponents at the March 27 meeting expressed skepticism that private pay residents would not be harmed.

“We have concerns about the unwritten portions of this bill and the private arrangement that falls outside the statute,” said George Linial with LeadingAge Texas, a trade association that advocates for nonprofit retirement communities and nursing homes. “The bill guarantees that someone will have to pay a tax, and there’s nothing in the statute that protects pay communities or residents from this tax.”

Sen. Charles Perry, R-Lubbock, who sits on the Health and Human Services Committee, said the part of the system that relies on voluntary participation raised some questions for him as well.

“How much is the voluntary fee?” he asked at the March 27 meeting. “That’s a question that I think we have to be able to answer. If I’m drawing down $19 and you asked me to voluntarily contribute part of that back to the nonprofit, my board today may have a heart for it, but two boards later might decide that [they’re] going to just keep it all that year.”

Proponents said fears about costs being passed on to private pay residents are unfounded, and characterizing the self-assessed fee as a tax is misleading.

“There’s going to be a binding legal contract in place,” Parades said. “The make-whole funds are paid first in the waterfall of payment. We’re also going to have a termination penalty for anyone who leaves the group voluntarily.”

Public testimony

Several speakers from the public testified at the March 27 hearing as well, including other nursing home facility managers who expressed support for the bill.

Darlene Evans—who worked in long-term care for 28 years at Autumn Winds Retirement Lodge in Schertz, Texas—said SB 1130 will provide a lifeline to long-term care providers who struggle to to keep up with growing costs and flat reimbursements. She said she and her husband were forced to sell Autumn Winds in 2015 because of the growing financial burden to run it.

“The hats we wore each day multiplied exponentially and eventually became too heavy,” she said. “The heavy regulation and low reimbursement made it difficult to provide out residents with the care they deserve. The sector is losing quality providers, who like us, truly care about our residents and their needs. [SB 1130] will help [providers]hire more quality staff and keep staff members who go above and beyond.”

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Shawn Arrajj

Shawn Arrajj serves as the editor of the Cy-Fair edition of Community Impact Newspaper where he covers the Cy-Fair and Jersey Village communities. He mainly writes about development, transportation and issues in Harris County.

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